Hedge fund closes Bermuda reinsurer

Caribbean Net News – Citadel Investment Group, one of the world’s biggest hedge funds, is closing down a Bermuda reinsurer it formed in 2004, according to a source familiar with the matter.

Citadel, which manages roughly $18 billion, thought it had a winning business plan with CIG Re because it was fully collateralized, giving the insured certainty their claims would be paid if catastrophe struck.

It is unwinding the reinsurer, according to this person, because the company’s cost of capital is too high. The reinsurer, which does not have a financial strength rating, has also had a hard time competing with rivals who do.

The Chicago-based firm formed the property-catastrophe reinsurer, CIG Reinsurance Ltd, four years ago because it saw reinsurance as uncorrelated with its other investment strategies.